Property Tax Cut or Tax Shift?

Eric Jennings, Lawrence County Commissioner Opinion Editorial, Black Hills Pioneer

Just when you think I couldn’t possibly write another article about property

tax, new laws passed this year added sales tax to the property tax relief

discussion.

The South Dakota Legislature passed Senate Bill (SB) 96 during the 2026 session

which will go into effect July 1, 2026. Individual counties will have the opportunity

to enact up to 0.5% county sales tax to generate revenue which can only

be used to offset the property tax burden for the county share of owner-

occupied residences. As discussed in previous articles, property tax is

collected for schools, municipalities, road, water and fire districts and

counties. If implemented, this new sales tax would go into a property tax

relief fund which can only be used to offset the county share of the owner-

occupied property tax. Counties can use up to 2% of the tax collected the

first year to upgrade software and other expenses relating to implementing

the property tax relief process and up to $20,000 each year thereafter to

offset administrative costs created by the sales tax. According to data

projections provided by the state, if the additional .5% tax was enacted,

Lawrence County would generate enough sales tax to offset 21% of the

total owner-occupied property tax, however specific relief for individual

properties would vary depending on their valuation and other factors. If

enough sales tax is generated to equal the county’s total owner-occupied

portion of property tax, the remaining revenue would be applied to non-

owner-occupied property tax.

Before you get excited about having a portion of your property tax reduced,

there are a few important timeline factors to be considered. First, the SD

Department of Revenue (DOR) has stated they will only begin collecting

county sales tax on either July 1st or January 1st. They also require 90

days’ notice following a passage of a sales tax ordinance before they will

begin collecting county sales tax. Remember those two dates, they will

become important later.

The county commission can pass an ordinance to create the sales tax or it

can be referred to a vote of the counties citizens. If passed, homeowners

would not necessarily experience immediate property tax relief. Projections

of the amount of sales tax generated can be made, but the actual figure of

sales tax generated won’t be known until it is collected. Depending on the

confidence level in the projections, counties may want to collect the sales tax prior to using that revenue for property tax relief to avoid a budget deficit if the sales tax receipts don’t reach the projections.

If you are still with me, let’s run through a hypothetical example of a sales

tax timeline. If a county commission were to decide a sales tax is a good

option for their county, they could pass an ordinance after SB96 becomes

law on July 1, 2026. They would then need to inform the SD DOR by

October 2 nd to begin collecting a county sales tax on January 1 st . On Jan 1,

2027, the DOR will begin collecting the percent of sales tax enacted by the

county and issue bi-monthly payments to that county. The county would

create a special property tax relief fund and deposit the revenue

accordingly. The county will make the necessary software upgrades to be

able to list the amount of relief of owner-occupied property tax the property

owner is entitled to from the revenue generated by the sales tax. If the

county bases the property tax credit on projections, the 2027 property tax

notices sent to property owners in January will have an amount of relief

listed. If the county chooses to collect the sales tax revenue before issuing

a property tax credit, the full amount of relief will be listed on the 2028

property tax notice.

The county sales tax option is property tax relief, not a property tax cut.

There is an old saying, “there are no property tax cuts, only tax shifts.”

SB96 is a shift from property tax to sales tax. This property tax relief option

affects everyone in the county whether you are a property owner looking for

tax relief or a consumer paying sales tax. It is important to consider the full

extent of this option and communicate your feelings on it with your county

commissioners.